What Would Broadband Competition Look Like?

from the what-if-Net-Neutrality-were-a-foreign-concept dept

The Reverse MVNO

There has been a big trend towards MVNO carriers in the mobile space - that is, carriers who are Mobile Virtual Network Operators, and don't actually operate their own cellular towers, spectrum, and network. These MVNOs outsource that part of the business to the big cellular operators as wholesale buyers, and focus on the marketing, the handsets, the retail, the billing, and the services. But in telecom these days, it's highly desirable to offer bundles of services, mixing fixed, mobile, Internet and TV packages to drive up total revenue and customer loyalty. Thus, it's interesting to note the start of a new trend, the FVNO, where the F is for Fixed. In the UK, O2 mobile has decided to expand their business into the fixed telecom sector, and is doing so by reselling the infrastructure of BT (British Telecom) under their own brand.

On Broadband Competition

Aside from the quirk of building MVNOs backwards, the shift is notable for readers here in the US, because it is illustrative of the kind of competition that can result when incumbent players are required to wholesale their fixed assets. O2, now owned by Spain's Telefonica, was a wireless-only company, but already offers fixed broadband to enterprise customers using BT's all-IP "21st Century Network". This move is indicative of a market where new entrants are free to launch, consumers have a wider range of choices, DSL speeds are faster, and yes, prices end up lower. So how exactly is that telco-cable duopoly working out for us in the US?

American readers not yet upset with the state of broadband in the US should feel free to click any of the links in the preceding paragraph to see the effect that competition has on a market. It makes all the players better, and offers huge benefits to consumers. The USA had exactly the same kind of competition codified into the Telecommunication Act of 1996. The act required incumbents to share their last mile through a regulation called UNE-P. UNE-P had some early effects: You may remember DSL upstarts that sprang onto the market like Speakeasy or Covad. But our UNE-P lacked teeth, and the incumbents were able to charge much higher wholesale prices than in Europe, where competition picked up steam. So by 2005, instead of re-enforcing UNE-P in the Telecom Reform Bill, yourCongress killed it completely. In this article, Masnick talks about how it mattered little, because the wholesale price was sabotaging the effort anyway.

On Net Neutrality

So now here we are in the US in 2010, still debating Network Neutrality. Does it look like "Net Neutrality" regulation is necessary in the UK? Heck no. Competition has completely obviated the need for Brits to regulate. Regulation is only necessary when monopoly powers are in effect, and the free market can't push Supply to offer what is in Demand. And what of the doomsday outcomes incumbents predict if they are forced to share assets? Did BT fall apart? Go bankrupt? Stop investing in any new infrastructure (as lobbyists say is the obvious outcome.) No! They became global leaders in rebuilding, investing, modernizing infrastructure, and launched the all-IP 21Century Network! BT became very good at wholesale as well as retail. Competition made every UK stakeholder better. So why don't we Americans forget Net Neutrality: Let's focus on bringing competition back to the US market. Our duopoly experiment has failed (surprise, surprise), the European examples are crystal clear. This debate is no longer theoretical.

Canadians want this too

We too have a similar wholesale sharing mandate. It has spawned a number of 3rd party resellers (of whom TekSavvy [ www.teksavvy.com ] is a broadbandreports favorite) on both Bell's copper and Roger's cable (less common).

But Bell has fought it every step of the way. They interpret the rules such that they don't have to offer anything over 5mbps service via wholesale, while they themselves sell service up to 15 or more mbps. This obviously kills competition in the high-speed market, as the 3rd party players can't offer the service -- at _any_ price.

Re: Canadians want this too

Yes, Canada has the kind of toothless UNE-P that we had in the US. It was in Canada that the incumbent put in traffic shaping policies that automatically affected all the ISP retailers using their core network. Thus, Teksavvy's product is controlled a great deal by Bell, and will have a hard time differentiating. Canada, too, should be looking at the EU examples, and Britain is but one. France has a vibrant ISP sector, full of competition.

Re: Net Neutrality.

Not really, and the name you call it has no effect on what it does in reality. What we need is competition, and market regulation is the antithesis of competition. We would need legislation, but incumbents are provided with a natural monopoly to run their networks through public property - simply requiring that any player have access to that "monopoly" at wholesale prices is right now possibly the best way of increasing private competition without subsequent government interference or infringing on property rights.

Re: Re: Net Neutrality.

Exactly how would you do that without legislation?

Or being Google?

Laws forbid people from constructing their own networks or put so many barriers that only the very wealthy can do it.

Owners of physical networks will not come together and pool all of their resources voluntarily will they? Specially in the U.S. were people value more what they own then their own communities apparently.

Besides Net Neutrality is about some form of competitiveness in the market and it is pushing in that direction, it is the beginning of legislation to increase competitiveness in the market place or maintain the actual levels.

Yes it could get mangled beyond recognition and not be what it was meant to be, but it is a start and people should support it and participate, in Europe competition only took off after legislation was passed forcing people to share their lines not before, so legislation will have to come at some point what it would be called?

Re: Re: Re: Net Neutrality.

Sure, and I don't speak for Ryan, but I think the rules required for line-sharing are MUCH simpler than the rules required for Net Neutrality. We should pursue the simpler legislation that produces the desired competitive market. We should NOT try to legislate the end result we want, neutral networks.

Trying to legislate neutral networks will be an ever-moving target as innovation takes place and things change. It will be easier to do regulatory capture, easier to skirt the rules.

We shouldn't regulate for the result, we should regulate to create a competitive market, because that will produce the right result today, tomorrow, and beyond.

Seperate the infrastructure from the ISP

I've been saying for years, things won't get straightened out until we divorce the infrastructure from the ISP's.

The interstate highway system is run by the government and everyone's allowed to drive on it. If we relied on a handful of companies to build maintain the roads, no one would ever leave their house and everything would cost an arm and a leg.

Back in the days of dial up the phone company ran the infrastructure (the POTS system) and there were dozens of ISP's competing for your business using them. If EarthLink got to big for its bridges then you could switch to AOL, or some local ISP.

Then the telephone company _became_ your ISP and as the articles author pointed out, Congress allowed them to force everyone else off. Cable operators (already having a monopoly in most of their areas) got into the act of being ISP's as well. What happened? Conflict of interest (low caps to keep you from dropping cable TV, messing with Skype to keep you from dropping your land line), no competition, increasing costs, little to no innovation.

We are quickly becoming the laughing stock of the 1st world. It's a shame really, seeing as we 'invented' the internet.

What needs to happen is that the infrastructure has to be run/maintained by one entity (could even be a non-profit or the government) that would allow everyone else to use that infrastructure. You could use it for yourself (large company, municipality, university) or become an ISP and offer service to the public.

It could be modeled on the road system, paid for by user fees. The feds would maintain the major links between states and other countries (think interstates). The states would control secondary links (think the state highway system). Local municipalities would manage local connections to people's homes and businesses (think Main St.). Verizon, AOL, John's Happy Internet could all compete to offer services to the public at large.

The job of the infrastructure entities would be to maintain efficient network connects, period. It doesn't matter if it's Linux distro's, telemedicine, or last week's American Idol. What is flowing down the pipes isn't their concern.

Re: Seperate the infrastructure from the ISP

Re: Re: Seperate the infrastructure from the ISP

Wow, what a well thought out response. You've convinced me completely. /sarcasm

I see the idea behind this as a good one, there are definatly some issues that may come of doing something along these lines, such as mismanagement, invasions of privacy, etc. but I do like the theory behind it.

Re: Seperate the infrastructure from the ISP

I don't think the government needs to own anything. Just force the owners to lease everything out at (unfortunately) regulated rates. The competition will come naturally, and everything will be paid for by customers in a competitive market, rather than by taxes.

Re: Re: Seperate the infrastructure from the ISP

Actually, now that I'm thinking about it, places with nationalized telecom infrastructures are some of the worst markets in the world. Now, they are in Africa and developing areas, so it's not an apples to apples comparison with the US...but those countries abuse the telecom monopoly to raise funds for the treasury.

You can call the UK for a pittance, especially using Skype. But try calling Botswana and see what the call costs - even on Skype. The Nationalized telcos charge the highest call termination rates in the world.

Re: Holy Crap Google did it

This is a positive development, for sure, but it will not occur fast enough, and will not cover the whole country.

As a comparison, we've had MetroPCS and Leap offer much cheaper cellular rates for years, and the big national providers don't have to match them since they are worried about a national market, not the handful of cities that Metro historically covered.

According to Wikipedia (easiest source) UK has a population density of 254 people per square kilometer, where the US has 32.

One of the places that has the best and cheapest broadband (and 3G, cell service, etc) is Hong Kong. 100MB DSL style connections for 99 HK dollars, or about $13 US per month. Population density? 6348 people per square km.

The question isn't competition over existing lines as it would only open competition where there is already service. This is where government policy is a problem, because it is "no rural hermit left behind", effectively not wanting to advance the cities too far past the most remote regions. Much of the money thrown around by the US government for infrastructure has been earmarked to run high speed internet into the middle of nowhere, serving few people for a high cost, all courtesy of the taxpayers.

The other point that is important is that any competitive systems would have to require all providers to share their infrastructure. I don't think the cable companies are very interested in that sort of thing, they may not be able to support it.

Re:

"The question isn't competition over existing lines as it would only open competition where there is already service."

I don't quite get this line. Your saying it will open competition where there is already service, but service doesn't equal competition. The way I see it is that is the whole point. Open competition where there is service now.

I agree mostly behind the latter part of the paragraph, we shouldn't be holding up the major urban centers so we keep in line with what people have in rural communities.

Re: Re:

don't quite get this line. Your saying it will open competition where there is already service, but service doesn't equal competition. The way I see it is that is the whole point. Open competition where there is service now.

it is sort of complicated. Yes, it would bring competition in the area that already have service, but it would not bring service for those who don't already have it. That goes against the stated government policies in the last 10 years.

Further, this sort of competition might actually take money away from extending the infrastructure, and concentrate that money more in the city centers, widening the digital divide. It might also take away enough financial incentive that incumbent right holders may not want to wire areas if there isn't enough money to be had for doing it.

Competition would only be for the haves, it wouldn't be for the have nots, and that just doesn't jive with the policies in place for at least 3 US administrations now.

Re: Re: Re:

Explain why:

- U.S. urban centers fall behind every other major city in the world that use the "one physical infra-structure for all" approach in terms of price, speeds and numbers of ISP's?

- Japan, France, U.K. and even Australia are investing more than the U.S., they all use that system and apparently their networks combined far surpass what the U.S. see even in remote areas and they do have remote areas were few people live.

- IXP's in Europe and elsewhere apparently have double the capacity of the U.S. IXP's? IXP's apparently in the U.S. operate almost near capacity while in other countries IXP's operate below 60% capacity, if evidence point to anything is that divorcing the infra-structure from the ISP greatly increases capacity.

Re: Re: Re: Re:

U.S. urban centers fall behind every other major city in the world that use the "one physical infra-structure for all" approach in terms of price, speeds and numbers of ISP's?

The government has mostly been putting money on the table for rural networking. The companies build where they get paid to build. They aren't getting paid to build in the city. They have an existing infrastructure that they aren't in a rush to upgrade past where they are at. I would suspect that the threat of forcing them to share the infrastructure is making them even less interested in building it up, because they won't have long to recoup the money.

You sort of have to look back at the last 100 years of deals made by government, direction, and how things worked out in the US to understand how it all happened. Instead of spending public money to buy the last mile, they let the phone and cable companies own it, and have done nothing to change it. Now it is pretty much too expensive to change.

Re: Re: Re: Re: Re:

Not by the gov't, but the market also has mechanisms for paying suppliers.

"I would suspect that the threat of forcing them to share the infrastructure is making them even less interested in building it up, because they won't have long to recoup the money."

That is what they and their lobbyists ALWAYS say, but the case in the UK with British Telecom suggests that is completely false. In fact, it would appear the opposite is true. BT is now competing to be the best wholesaler.

How cool would it be if our last-mile telcos, IXPs, and core network companies competed to be the best wholesaler?

Re: Re: Re:

So I assume that in this respect Australia is an aberration? We have the copper infrastructure owned and maintained by a single entity (Telstra) who are also the nation's largest ISP. However, government regulation decreed that the infrastructure (which had been built at the taxpayer's expense years ago) would be open to all other telcos and ISPs.
Consequently we have a choice of ISP in every city (sometimes six or seven of them) all running on the same infrastructure - the only difference is that they have their own DSLAMs in the exchanges, so when you change from one ISP to another it is a case of the guy going into the exchange and unhooking your line from one router and putting it into another.
The upshot of this is that we now have true ISp competition, since they all pay the same wholesale rate for access, and we can choose the plan and ISP based on our needs and personal preferences.
Having said this, Telstra(the incumbent who owns the lines) is consistently and significantly more expensive than the competition.

Re: Re: Re:

What exactly is the point you're trying to make? That unbundling won't solve every internet problem all at once? True, if obvious. That it will be difficult because the incumbents will lobby against it? Also true, but not a legitimate argument to not do it.

I think we need to force the infrastructure owners to open up, and at the same time force them to invest in rural access, for real. They already took the money to do it, now they need to actually do it, we should not give them any more money. They already spent it? Tough. Invest, or the government forecloses your assets and sells them to somebody who will invest. Yes, I might as well be smoking crack for all the chance that law could ever be passed.

A New Infrastructure Model

The ISPs and the Telcos started off with a common core focus: infrastructure provisioning and management with network service on top. The convergence of telecom with the Internet made the merging of these companies inevitable and, for the most part, it has happened.

The resulting companies have little core competency when it comes to innovative apps and services so I think they're wasting a lot of effort focusing there. Instead, why don't they start exploring synergies with another huge infrastructure-based industry - the power companies. Once again, lots of common core competencies and similar types of goals.

Let's move forward with net neutrality so we can get unfettered innovation at the apps and services level, and let the Network Operators get together with the operators of the power grids and see what they can do for us. Maybe we'll all hate them less then.

fiber to the door.

I think it would be nice, if local municipalities offered fiber to the door, with a single switch/colo center that other services/vendors can offer feeds/connections into, in order to supply the client-side portion.

The municipality would run the fiber, maintain physical connectivity, and even provide the last mile infrastructure. The internet companies can then offer services, by either providing their own backbone trunk to that location, or by service contracts to the municipality. The city can then charge a per-node fee to the company, who then bills the customer. The services would mainly be feature adds, how good their infrastructure connection is to said city, dns, email, etc would be value adds. Instead of locking things down, as it is now.

There could be more feature-rich competitors (Earthlink with included AV services etc), to bare-bones (here's your network block). It's just a thought/hope.

Re: fiber to the door.

Your local governments are too broke and too incompetent to manage it. They can't pick up your trash and clean the sidewalks, can you imagine what it would be like if you have a last mile problem? It could be years before you got service back.